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A Positive Theory of Income Taxation

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Author Info
Oriol Carbonell-Nicolau (Rutgers University and CODE, Universitat Autònoma de Barcelona)

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Abstract

We explore the consequences of electoral competition for nonlinear income taxation. Our model is a dynamic version of the standard two-party electoral competition model adapted to nonlinear income taxation. The theory has a number of desirable features. First, equilibria always exist, even though the set of admissible tax policies is multidimensional. Second, the Nash set can be characterized generically, and its components give sharp predictions. Third, the features of equilibrium tax policies depend only on empirically meaningful fundamentals.

Equilibrium tax schedules benefit the more numerous income groups and place the burden of taxation on income groups with fewer voters. For empirical income distributions, the features of an equilibrium tax schedule are reminiscent of Director's law of public income redistribution (Stigler [39]).

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1553&context=bejte
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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 9 (2009)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:25

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Web page: http://www.bepress.com/bejte

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Related research
Keywords: nonlinear income taxation; electoral competition; Director's law; extensive zero-sum game;

Other versions of this item:

Find related papers by JEL classification:
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation

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    Other versions:
  6. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-61, July. [Downloadable!] (restricted)
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    Other versions:
  8. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
    Other versions:
  9. Kranich, Laurence, 2001. " Altruism and the Political Economy of Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 455-69. [Downloadable!] (restricted)
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  12. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Representative democracy and marginal rate progressive income taxation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1137-1164, May. [Downloadable!] (restricted)
    Other versions:
  13. David Austen-Smith, 2000. "Redistributing Income under Proportional Representation," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1235-1269, December. [Downloadable!] (restricted)
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    Other versions:
  16. Stigler, George J, 1970. "Director's Law of Public Income Redistribution," Journal of Law & Economics, University of Chicago Press, vol. 13(1), pages 1-10, April.
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    • Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2005. "Vote Buying," Others 0503006, EconWPA. [Downloadable!]
    • Jackson, Matthew O. & Dekel, Eddie & Wolinsky, Asher, 2005. "Vote buying," Working Papers 1215, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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    Other versions:
  21. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
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